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Protect Your Merchant ID…Your Business Depends on It.

Do you know where to find your merchant ID (or MID)? It’s a simple little code, but your merchant identification number is an extremely important part of any transaction.

Your MID is how the funds from a transaction make it from the cardholder’s bank to your merchant account? It's how all the different players involved make sure that the money ends up in the right place. Your MID plays a critical role in every step of the reconciliation process.

What is a Merchant ID?

A merchant ID is a unique code provided by your payment processor. Often abbreviated as MID, you'll receive one when you open a merchant account with an acquiring bank.

The Acquirer transmits this code, along with cardholder information, to involved parties for transaction reconciliation. The MID can help identify you when communicating with the processor and other parties. Before you can get a merchant ID, though, you'll need to verify your business. This involves documentation such as a Taxpayer Identification Number, names of the principal owners, and other relevant information.

In some cases, ISOs (independent sales organisations) serve as a bridge between merchant and acquirer, thereby playing a role in MID acquisition.

You don’t need a formal merchant account to work a with service like Square and PayPal to process payments. Thus, you don’t get a MID if you use them. If you work with a standard merchant acquirer to accept payments, though, you should have a MID. Not sure where to find it? This resource can help.

You can be issued a new MID in certain circumstances. For example, you'll be issued a new MID if you ever switch card processing companies.

In the hands of a fraudster, your MID could be used to run illegitimate transactions, so plan to do everything you can to keep your merchant identification number secure. If a third party ever needs to review your processing statement, for example, it’s a smart idea to black out the MID before copying or faxing any information.

Can I Have Multiple MIDs?

One of the first questions merchants tend to have about a merchant ID number is: “can you have more than one?” The short answer is yes, you can have more than one MID, but a single merchant ID is enough for what most businesses need.

To explain this, first let’s distinguish between a MID and a TID.

“TID” stands for “terminal identification number.” You’ll have a unique TID for each of your card terminals, but all of them can still be grouped together under a single merchant identification number. In fact, you can even have multiple merchant accounts, but still group them together with the same MID.

So…why do some merchants have multiple different MIDs, you ask? Generally, it’s for accounting purposes. Businesses with different sales channels like restaurants, hotels, and multichannel retail often have unique MIDs for different revenue streams. This helps separate and track where different revenue comes from. As mentioned before, though, most businesses will only need one MID.

Can I Lose My MID?

Again…the short answer is “yes.” The most common reason businesses lose their merchant identification number is excessive chargebacks. Before we dive into that, however, it’s important to distinguish between a temporary hold and the more serious, long-term actions that can be taken against your account.

WITHHELD FUNDS

A practice allowing your processor to withhold a portion of transaction funds. This can be done for a variety of reasons; suspicious account activity is a common trigger, as is a sudden spike in chargeback volume.

These funds can be held indefinitely while your processor investigates your situation. Based on certain factors, your processor could also make this hold permanent in the form of a merchant account reserve. This is a common practice, especially for merchants in high-risk verticals. An ongoing merchant account reserve can be a rolling, capped, or up-front hold.

PROCESSING FREEZE

A processing freeze occurs when your processor temporarily shuts down your ability to accept card payments. This can happen if your chargeback ratio gets too close to the chargeback threshold outlined by the card scheme.

This is a serious setback for brick-and-mortar sellers. They're limited to cash transactions while the freeze is in place. It’s a life-or-death matter for eCommerce merchants, though, as you have few options available without credit or debit sales. You could accept payments via PayPal…but that’s about it while a processing freeze is in place.

TERMINATION

This is a pretty simple idea: your processor or acquirer sees you as more of a risk than an asset, so they cancel your merchant ID and close your account. This can be because of a clear or flagrant violation of the bank’s terms of service. More often, though, it’s because your chargeback ratio is consistently near acceptable limits. You see sustained chargeback activity, and the bank refuses to cover for you any longer.

You’ll have to switch over to a high-risk processor, which means higher fees and more restrictions. That’s assuming your business survives the downtime. After all, you can’t accept any cards until you get a MID with a new processor and acquirer.

How Can I Protect My MID?

You have numerous tools at your disposal to prevent chargebacks due to criminal fraud, including:

Fraud Filters

Address Verification (AVS)

CVV Verification

3-D Secure

Geolocation

Biometric Technology

That sounds simple, but chargeback sources are extremely difficult to identify. Our research shows friendly fraud causes most chargebacks. These disputes rely on passing as a legitimate transaction. If you’re going to stop chargebacks and protect your MID, you’ll need a more comprehensive approach.